See, Carmakers, the Chip Shortage Isn't Personal
(Bloomberg Opinion) -- After months of automakers and supportive governments complaining that a shortage of chips was hurting business, two more companies have come out to show that they’re not alone. Neither makes cars.
Samsung Electronics Co. is facing a serious imbalance in semiconductors globally, with the shortfall to hurt its business next quarter, executives said at its annual shareholders’ meeting Wednesday. The company later clarified that a possible delay in the release of its flagship Galaxy Note smartphone isn’t related to the shortage but is aimed at avoiding the release of two models with a stylus in the same year. It unveiled three variants of its Galaxy S21 in January. Meanwhile, Taiwanese PC maker Asustek Computer Inc. told investors that it expects chip demand to outstrip supply through the first half. This quarter alone, component availability is around 25% to 30% lower than required, the Taipei-based company said.
For carmakers, to see another sector impacted serves as affirmation that this isn’t personal. Companies from Europe to the U.S. have bemoaned the fact that manufacturers of semiconductors didn’t prioritize auto chips at the expense of other sectors of the global supply chain, such as smartphones, computers and games consoles. Honda Motor Co. has become the latest example, with Reuters reporting that it will suspend some production at facilities in North America for one week due to an amalgam of factors that includes chip shortages, port congestion and winter weather.
Some automakers have co-opted politicians to call Taipei to see if the government there could lean on the world’s most-important chip supplier to speed things up a little. Taiwan Semiconductor Manufacturing Co. had already said in January that it’s working to prioritize output of the components that go into cars, a move that would necessarily put other sectors lower in the pecking order.
But, to be blunt, vehicles account for just 3% of TSMC’s revenue — and it was the autos supply chain itself that erred in cutting back orders amid the panic of a developing global pandemic a year ago. As my colleague Anjani Trivedi wrote last month, Toyota Motor Corp. was savvy enough to shelve its just-in-time manufacturing model to ensure a stockpile of components, and as a result will suffer minimal interruption.
Remember that Samsung is the only company in the world to make smartphones as well as the key components that go into them — displays and chips. So when executives there struggle to get their hands on enough parts to keep production lines humming, then you know something bigger is afoot.
Although unrelated to the chip constraint, a decision to cancel its second-half flagship smartphone release points to a broader rethink of its product strategy. That device typically comes out around the same time as Apple Inc.’s iPhone. Avoiding a clash would be a good reason to reset the launch schedule if it believes end-demand six months from now may not be so robust.
The pronouncements from two major names in electronics serve as a warning to chip suppliers — some of which are competitors to Samsung — that failure to keep up will hurt them all. There’s a growing sense that they want to pressure the likes of TSMC to expand capacity even more, at the risk of spurring the custom chip foundry to overbuild and get caught with the costs.
But the Taiwanese supplier is no fool and has a record of being cautious in expansion. For the likes of Samsung and Asustek, the downside to such talk may merely be the loss of credibility that comes from crying wolf. Asustek, for example, admitted that it’s seeing overbooking — customers placing more orders for components than are actually needed — which muddies the waters on just how bad the shortfall really is.
As carmakers look to get back on the road after the chip sector started to give them priority, it may be of no consolation to learn that other sectors are now hurting, too.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.
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